Is Gold a Safe Investment in the Current Economic Situation

Is fortunate a upright investing in the current economic situation? spheric demand for sumptuous has been on the rise and with good reason- the price of the curious metal has been consistently breaking new highs purge though markets passim the world remain weak (Lee, 2011). In the last decade alone, notes has achieved a 500% increase in rank and more relevantly, it has soared from $1400 (an ounce) in January this year to a peak of $1920 (Prial, 2011). Thiru (2011) of Lloyd TSB, determined that gold has provided the best returns for investors in 2011 (as cited in Lee, 2011).However, distinguished private banks and investors remain cynical of golds invariable rise and have even deemed the asset as the ultimate bubble that provide eventually burst (Soros, 2010 as cited in Conway, 2010). condescension the warnings of George Soros and Wells Fargo, the chicken metal continues to sustain its steady run and is, agree to West (2011), looking stronger now than it has ever been in the last decade. This need aims to investigate the justifications behind golds rising foster and result also consider the relevant refutations that discredit the goodnesss safe haven status.The recent appreciation in gold prices goat be substantiated on a wide array of merits, disapproving the claims that the goodness is unnaturally overvalued. Firstly, as affirmed by Spall (2008), gold retains its value even during inflation and consequently, has become a popular avenue for wealth enthronisation in periods of great uncertainty. Early signs of global economic instability generate the European Central bank to heavily reinforce its gold s block more than 2 years ago (Prial, 2011).And while the Euro zone sincerely yours faces a deepened fiscal crisis, gold is becoming even more enchanting still. Because most economies throughout the world remain weak, currencies such as the Swiss Franc, dollar assets such as US treasury bills and other investments that were one time cons idered secure, have lost the confidence and backing of investors. Alternatively, people look to gold as a stronger and safer investment. Ironically enough, economies that do manage positive growth, such as China and India, have also been witnessing rising demand for the white-livered metal.In the case of India, this comes in the form of consumer goods such as jewelry. The Peoples Bank of China has one of the lowest rates of gold militia but is planning to double its issuance of gold bullion Chinese coins in the near future (Holmes, 2011). In the past the gold metre was used as a basis for exchange, but inefficiencies in substantiate the system saw the link between the US dollar and gold removed. Nonetheless, the value of gold still retains a strong correlation to the value of the dollar (Hajjar, 2011).With the Federal Reserves freedom to print money, the value of the dollar in circulation has reached trillions. Contrastingly, levels of gold production have remained moderately i nvariant throughout time. The imbalance in the value of USDs versus the value of gold reserves, gives the commodity augmented capacity for further price increases. The soaring gold prices shag also be explained by the unconventionally large amounts of quantitative temperance that has taken place in recent years. Such a indemnity causes inflation and uncertainty, which in turn makes gold more popular.In late September, Ben Bernanke say Operation Twist -which would cease additional printing of money. Commodity markets responded peaked(predicate) to the announcement, with gold devaluing by nearly 9% in just devil days (Prial, 2011). Although gold prices eventually sustained in value and proceeded with its run, the commoditys sharp plummet after a single indemnity revision creates doubt in the safety of gold investments. It also introduces the curtain raising that golds upward trend has been the result of risky commodity speculation.Nevertheless, by acknowledging the current lev el of economic instability, lack in investment alternatives and unstable dollar value, the present high price of gold can be easily accepted. An educated guess would have me value the yellow metal at a stable $1700 an ounce by the end of this year. As long as market volatility persists, gold will be able to keep its high prices afloat and retain its come in as a safe investment. If the commodity truly is in a bubble, then it is likely to burst- in a convincingly upward manner.